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| 1. |
State with reasons whether following are Capital or Revenue Expenditures: (i) Custom duty paid on import of a machinery. (ii) Wages paid in connection with the erection of a new machinery. (iii) Rs 5,000 spent on repainting the factory. (iv) Repairs for Rs 2,000 necessitated by negligence of an operator of machine. (v) Rs 10,000 paid for electricity bill |
| Answer» <html><body><p></p>Solution :(i) Custom duty paid on import of a machinery is a Capital Expenditure because it is incurred for the <a href="https://interviewquestions.tuteehub.com/tag/acquisition-847836" style="font-weight:bold;" target="_blank" title="Click to know more about ACQUISITION">ACQUISITION</a> of a new asset. <br/> (ii) Wages paid in connection with the <a href="https://interviewquestions.tuteehub.com/tag/erection-974798" style="font-weight:bold;" target="_blank" title="Click to know more about ERECTION">ERECTION</a> of a new machinery is Capital Expenditure because it is in connection with the acquisition of new asset. <br/> (iii) Rs 5,000 <a href="https://interviewquestions.tuteehub.com/tag/spent-1222060" style="font-weight:bold;" target="_blank" title="Click to know more about SPENT">SPENT</a> on repainting the factory is Revenue Expendilure because it has been incurred to maintain the factory building. <br/> (iv) Repairs for Rs 2,000 necessitated by negligence of an operator of machine is Revenue Expenditure since it has not improved the asset (machine) in any way. <br/> (v) Rs 10,000 paid for electricity <a href="https://interviewquestions.tuteehub.com/tag/bill-398201" style="font-weight:bold;" target="_blank" title="Click to know more about BILL">BILL</a> is Revenue Expendilure because it is a part of operating cost.</body></html> | |